First Financial Bancorp (FFBC) in Cincinnati warned that it will take a hit to fourth-quarter earnings because of a $22.4 million valuation adjustment to its indemnification asset from the Federal Deposit Insurance Corp.
The $6.2 billion-asset company made three FDIC-assisted purchases of failed banks in 2009, gaining $2.1 billion of loans covered by loss-sharing agreements. First Financial's original estimated FDIC indemnification asset was $288 million. After the valuation adjustment, the asset will be $45.1 million as of Dec. 31.
First Financial said it will likely report earnings of 7 cents a share, a reduction of 26 cents, due to the adjustment.
The company said it is making the adjustment because higher credit quality has improved expected cash flows on covered loans. First Financial also said it is filing fewer loss claims with the FDIC and making higher reimbursements to the agency. The company also attributed the decision to "the significantly shorter remaining life of the indemnification asset in comparison to the weighted average life of the related covered loans."
First Financial will provide more details about the impact of the valuation adjustment when it reports its fourth-quarter earnings on Jan. 30.